Hamilton v. Kentucky Distilleries & Warehouse Company/Opinion of the Court

The armistice with Germany was signed November 11, 1918. Thereafter Congress passed, and on November 21, 1918, the President approved the War-Time Prohibition Act (40 Stat. 1045, 1046, c. 212), which provides as follows:

'That after June thirtieth, nineteen hundred and nineteen,     until the conclusion of the present war and thereafter until      the termination of demobilization, the date of which shall be      determined and proclaimed by the President of the United      States, for the purpose of conserving the man power of the      Nation, and to increase efficiency in the production of arms,      munitions, ships, food, and clothing for the army and navy,      it shall be unlawful to sell for beverage purposes any      distilled spirits, and during said time no distilled spirits      held in bond shall be removed therefrom for beverage purposes      except for export. * *  * '

On October 10, 1919, the Kentucky Distilleries & Warehouse Company, owner of distillery warehouses and of whisky therein, brought in the District Court of the United States for the Western District of Kentucky a suit against Hamilton, collector of internal revenue for that district, alleging that the above act was void or had become inoperative, and praying that he be enjoined from interfering, by reason of that act, with the usual process of withdrawal, distribution and sale of the whisky in bond. The case was heard before the District Judge on plaintiff's motion for a preliminary injunction and defendant's motion to dismiss. A decision without opinion was rendered for the plaintiff; and, the defendant declining to plead further, a final decree was entered granting a permanent injunction in accordance with the prayer of the bill. A similar suit seeking like relief was brought on October 29, 1919, by Dryfoos, Blum & Co., in the District Court of the United States for the Southern District of New York, against Edwards, collector for that district. That case was heard on November 5 before the District Judge on like motions for a preliminary injunction and to dismiss. An opinion was filed November 14, 1919, holding the act in force, and on the following day a final decree was entered dismissing the bill.

The essential facts in the two cases differ in this: In the Kentucky case the whisky was stored in a distillery warehouse; the plaintiff was the maker of the whisky, had owned it prior to the passage of the act, and had, since June 30, 1919, paid the revenue tax on part of it. In the New York case the liquors were in general and special bonded warehouses, the plaintiffs were jobbers, and it does not appear when they became the owners of the liquors. Both cases come here by direct appeal under section 238 of the Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1157 [Comp. St. § 1215]), were argued on the same day, and may be disposed of together. Four contentions are made in support of the relief prayed for: (1) That the act was void when enacted because it violated the Fifth Amendment; (2) that it became void before these suits were brought by reason of the passing of the war emergency; (3) that it was abrogated or repealed by the Eighteenth Amendment; (4) that by its own terms it expired before the commencement of these suits. These contentions will be considered in their order.

First. Is the act void because it takes private property for public purposes without compensation in violation of the Fifth Amendment? The contention is this: The Constitution did not confer police power upon Congress. Its power to regulate the liquor traffic must therefore be sought for in the implied war powers; that is, the power 'to make all laws * *  * necessary and proper for carrying into execution' the war powers expressly granted. Article 1, § 8, cl. 18. Congress might under this implied power temporarily regulate the sale of liquor and, if reasonably necessary, forbid its sale in order to guard and promote the efficiency of the men composing the army and the navy and of the workers engaged in supplying them with arms, munitions, transportation and supplies. McKinley v. United States, 249 U.S. 397, 399, 39 Sup. Ct. 324, 63 L. Ed. 668. But the exercise of the war powers is (except in respect to property destroyed by military operations, United States v. Pacific Railroad, 120 U.S. 227, 239, 7 Sup. Ct. 490, and supervision, the council may United States v. Russell, 13 Wall. 623, 627, 20 L. Ed. 474. The severe restriction imposed by the act upon the disposition of liquors amounts to a taking of property, and, being uncompensated, would, at least as applied to liquors acquired before the passage of the act, exceed even the restriction held to be admissible under the broad police powers possessed by the states. Therefore, since it fails to make provision for compensation, which in every other instance Congress made when authorizing the taking or use of property for war purposes, it is void. Such is the argument of the plaintiffs below.

That the United States lacks the police power, and that this was reserved to the states by the Tenth Amendment, is true. But it is none the less true that when the United States exerts any of the powers conferred upon it by the Constitution, no valid objection can be based upon the fact that such exercise may be attended by the same incidents which attend the exercise by a state of its police power, or that it may tend to accomplish a similar purpose. Lottery Case, 188 U.S. 321, 357, 23 Sup. Ct. 321, 47 L. Ed. 492; McCray v. United States, 195 U.S. 27, 24 Sup. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; Hipolite Egg Co. v. United States, 220 U.S. 45, 58, 31 Sup. Ct. 364, 55 L. Ed. 364; Hoke v. United States, 227 U.S. 308, 323; 33 Sup. Ct. 281, 57 L. Ed. 523, 43 L. R. A. (N. S.) 906, Ann. Cas. 1913E, 905; Seven Cases v. United States, 239 U.S. 510, 515, 36 Sup. Ct. 190, 60 L. Ed. 411, L. R. A. 1916D, 164; United States v. Doremus, 249 U.S. 86, 93, 94, 39 Sup. Ct. 214, 63 L. Ed. 493. The war power of the United States, like its other powers and like the police power of the states, is subject to applicable constitutional limitations. (Ex parte Milligan, 4 Wall. 2, 121-127, 18 L. Ed. 281; Monongahela Navigation Co. v. United States, 148 U.S. 312, 336, 13 Sup. Ct. 622, 37 L. Ed. 463; United States v. Joint Traffic Assoc., 171 U.S. 505, 571, 19 Sup. Ct. 25, 43 L. Ed. 259; McCray v. United States, 195 U.S. 27, 61, 24 Sup. Ct. 769, 49 L. Ed. 18, 1 Ann. Cas. 561; United States v. Cress, 243 U.S. 316, 326, 37 Sup. Ct. 380, 61 L. Ed. 746); but the Fifth Amendment imposes in this respect no greater limitation upon the national power than does the Fourteenth Amendment upon state power (In Re Kemmler, 136 U.S. 436, 448, 10 Sup. Ct. 930, 34 L. Ed. 519; Carroll v. Greenwich Ins. Co., 199 U.S. 401, 410, 26 Sup. Ct. 66, 50 L. Ed. 246). If the nature and conditions of a restriction upon the use or disposition of property is such that a state could, under the police power, impose it consistently with the Fourteenth Amendment without making compensation, then the United States may for a permitted purpose impose a like restriction consistently with the Fifth Amendment without making compensation; for prohibition of the liquor traffic is conceded to be an appropriate means of increasing out war efficiency.

There was no appropriation of the liquor for public purposes. The War-Time Prohibition Act fixed a period of seven months and nine days from its passage during which liquors could be disposed of free from any restriction imposed by the federal government. Thereafter, until the end of the war and the termination of mobilization, it permits an unrestricted sale for export and, within the United States, sales for other than beverage purposes. The uncompensated restriction upon the disposition of liquors imposed by this act is of a nature far less severe than the restrictions upon the use of property acquired before the enactment of the prohibitory law which were held to be permissible in cases arising under the Fourteenth Amendment. Mugler v. Kansas, 123 U.S. 623, 668, 8 Sup. Ct. 273, 31 L. Ed. 205; Kidd v. Pearson, 128 U.S. 1, 23, 9 Sup. Ct. 6, 32 L. Ed. 346. The question whether an absolute prohibition of sale could be applied by a state to liquor acquired before the enactment of the prohibitory law has been raised by this court, but not answered, because unnecessary to a decision. Bartemeyer v. Iowa, 18 Wall. 129, 133, 21 L. Ed. 929; Beer Co. v. Massachusetts, 97 U.S. 25, 32, 33, 24 L. Ed. 989; Eberle v. Michigan, 232 U.S. 700, 706, 34 Sup. Ct. 464, 58 L. Ed. 803; Barbour v. Georgia, 249 U.S. 454, 459, 39 Sup. Ct. 316, 63 L. Ed. 704. See, however, Mugler v. Kansas, supra, 123 U.S. 623, 625, 657, 8 Sup. Ct. 273, 31 L. Ed. 205. But no reason appears why a state statute, which postpones its effective date long enough to enable those engaged in the business to dispose of stocks on hand at the date of its enactment, should be obnoxious to the Fourteenth Amendment, or why such a federal law should be obnoxious to the Fifth Amendment. We cannot say that seven months and nine days was not a reasonable time within which to dispose of all liquors in bonded warehouses on November 21, 1918. The amount then in storage was materially less than was usually carried, because no such liquor could be lawfully made in America under the Lever Food and Fuel Control Act (Act Aug. 10, 1917, c. 53, § 15, 40 Stat. 276, 282 [Comp. St. 1918, § 3115 1/8 l]) after September 9, 1917. And if, as is suggested, the liquors remaining in bond November 21, 1918, were not yet sufficiently ripened or aged to permit them to be advantageously disposed of within the limited period of seven months and nine days thereafter, the resulting inconvenience to the owner, attributable to the inherent qualities of the property itself, cannot be regarded as a taking of property in the constitutional sense. Clark Distilling Co. v. Western Maryland Ry. Co., 242 U.S. 311, 332, 37 Sup. Ct. 180, 61 L. Ed. 326, L. R. A. 1917B, 1218, Ann. Cas. 1917B, 845.

Second. Did the Act become void by the passing of the war emergency before the commencement of these suits? It is conceded that the mere cessation of hostilities under the armistice did not abridge or suspend the power of Congress to resort to prohibition of the liquor traffic as a means of increasing our war efficiency, that the support and care of the army and navy during demobilization was within the war emergency, and that, hence, the act was valid when passed. The contention is that between the date of its enactment and the commencement of these suits it had become evident that hostilities would not be resumed, that demobilization had been effected, that thereby the war emergency was removed, and that when the emergency ceased the statute became void.

To establish that the emergency has passed, statements and acts of the President and of other executive officers are adduced; some of them antedating the enactment of the statute here in question. There are statements of the President to the effect that the war has ended and peace has come, that certain war agencies and activities should be discontinued, that our enemies are impotent to renew hostilities and that the objects of the act here in question have been satisfied in the demobilization of the army and navy. It is shown that many war-time activities have been suspended, that vast quantities of war materials have been disposed of, that trade with Germany has been resumed, and that the censorship of postal, telegraphic and wire communications has been removed. But we have also the fact that since these statements were made and these acts were done, Congress, on October 28, 1919, passed over the President's veto the National Prohibition Act, which, in making further provision for the administration of the War-Time Prohibition Act, treats the war as continuing and demobilization as incomplete; that the Senate, on November 19, 1919, refused to ratify the Treaty of Peace with Germany; that under the provisions of the Lever Act the President resumed, on October 30, 1919, the control of the fuel supply which he had relinquished partly on January 31, 1919, and partly on February 20, 1919; that he is still operating the railroads, of which control had been taken as a war measure; and that on November 18, 1919, he vetoed Senate Bill 641, because it diminished that control, that pursuant to the Act of March 4, 1919, c. 125, 40 Stat. 1348, he continues to control, by means of the Food Administration Grain Corporation, the supply of grain and wheat flour; that through the United States Sugar Equalization Board, Incorporated, he still regulates the price of sugar; that in his message to Congress on December 2, 1919, he urgently recommended the further extension for six months of the powers of the Food Administration; that as commander-in-chief he stills keeps a part of the army in enemy occupied territory and another part in Siberia; and that he has refrained from issuing the proclamation declaring the termination of demobilization for which this act provides.

The present contention may be stated thus: That notwithstanding the act was a proper exercise of the war power of Congress at the date of its approval and contains its own period of limitation-'until the conclusion of the present war and thereafter until the termination of demob ilization'-the progress of events since that time had produced so great a change of conditions and there now is so clearly a want of necessity for conserving the man power of the nation, for increased efficiency in the production of arms, munitions, and supplies, that the prohibition of the sale of distilled spirits for beverage purposes can no longer be enforced, because it would be beyond the constitutional authority of Congress in the exercise of the war power to impose such a prohibition under present circumstances. Assuming that the implied power to enact such a prohibition must depend, not upon the existence of a technical state of war, terminable only with the ratification of a treaty of peace or a proclamation of peace (United States v. Anderson, 9 Wall. 56, 70, 19 L. Ed. 615; The Protector, 12 Wall. 700, 702, 20 L. Ed. 463; Hijo v. United States, 194 U.S. 315, 323, 24 Sup. Ct. 727, 48 L. Ed. 994), but upon some actual emergency or necessity arising out of the war or incident to it, still, as was said in Stewart v. Kahn, 11 Wall. 493, 507, 20 L. Ed. 176:

'The power is not limited to victories in the field and the     dispersion of the insurgent forces. It carries with it     inherently the power to guard against the immediate renewal      of the conflict, and to remedy the evils which have arisen      from its rise and progress.'

No principle of our constitutional law is more firmly established than that this court may not, in passing upon the validity of a statute, inquire into the motives of Congress. United States v. Des Moines Navigation Co., 142 U.S. 510, 544, 12 Sup. Ct. 308, 35 L. Ed. 1099; McCray v. United States, 195 U.S. 27, 53-59, 24 Sup. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; Weber v. Freed, 239 U.S. 325, 330, 36 Sup. Ct. 131, 60 L. Ed. 308, Ann. Cas. 1916C, 317; Dakota Central Telephone Co. v. South Dakota, 250 U.S. 163, 184, 39 Sup. Ct. 507, 63 L. Ed. 910. Nor may the court inquire into the wisdom of the legislation. McCulloch v. Maryland, 4 Wheat. 316, 421, 4 L. Ed. 579; Gibbons v. Ogden, 9 Wheat. 1, 197, 6 L. Ed. 23; Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 25, 36 Sup. Ct. 236, 60 L. Ed. 493, Ann. Cas. 1917B, 713, L. R. A. 1917D, 414; Rast v. Van Deman & Lewis, 240 U.S. 342, 357, 36 Sup. Ct. 370, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455. Nor may it pass upon the necessity for the exercise of a power possessed, since the possible abuse of a power is not an argument against its existence. Lottery Case, 188 U.S. 321, 363, 23 Sup. Ct. 321, 47 L. Ed. 492.

That a statute valid when enacted may cease to have validity owing to a change of circumstances has been recognized, with respect to state laws, in several rate cases. Minnesota Rate Cases, 230 U.S. 352, 473, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; Missouri Rate Cases, 230 U.S. 474, 508, 33 Sup. Ct. 976, 57 L. Ed. 1572; Lincoln Gas Co. v. Lincoln, 250 U.S. 256, 268, 39 Sup. Ct. 454, 63 L. Ed. 968. That the doctrine is applicable to acts of Congress was conceded arguendo in Perrin v. United States, 232 U.S. 478, 486, 34 Sup. Ct. 387, 58 L. Ed. 691, and Johnson v. Gearlds, 234 U.S. 422, 446, 34 Sup. Ct. 794, 58 L. Ed. 1383. In each of these cases Congress had prohibited the introduction of liquor into lands inhabited by Indians without specified limit of time; in one case, the prohibition was in terms perpetual; in the other, it was to continue 'until otherwise provided by Congress.' In both cases it was contended that the constitutional power of Congress over the subject-matter necessarily was limited to what was reasonably essential to the protection of the Indians. In the Perrin Case it was contended (232 U.S. 482, 34 Sup Ct. 387, 58 L. Ed. 691) that the power was transcended because the prohibition embraced territory greatly in excess of what the situation reasonably required, and because its operation was not confined to a designated period reasonable in duration but apparently was intended to be perpetual. In Johnson v. Gearlds the contention was (234 U.S. 442, 34 Sup. Ct. 794, 58 L. Ed. 1383) that a prohibition originally valid had become obsolete by reason of changes in the character of the territory included in it and the status of the Indians therein. In both cases the court, while assuming that since the power to impose a prohibition of this character was incident to the presence of the Indians and their status as wards of the government and did not extend beyond what was reasonably essential to their protection it followed that a prohibition valid in the beginning would become inoperative when in regular course the Indians affected were completely emancipated from federal guardianship and control, nevertheless held that the courts would not be justified in declaring that the restriction either was originally invalid or had become obsolete if any considerable number of Indians remained wards of the government within the prohibited territory. In each case the decision rested upon the ground that the question what was reasonably essential to the protection of the Indians was one primarily for the consideration of the lawmaking body, that Congress was invested with a wide discretion, and that its action, unless purely arbitrary, must be accepted and given full effect by the courts.

Conceding, then, for the purposes of the present case, that the question of the continued validity of the War-Time Prohibition Act under the changed circumstances depends upon whether it appears that there is no longer any necessity for the prohibition of the sale of distilled spirits for beverage purposes, it remains to be said that on obvious grounds every reasonable intendment must be made in favor of its continuing validity, the prescribed period of limitation not having arrived; that to Congress in the exercise of its powers, not least the war power, upon which the very life of the nation depends, a wide latitude of discretion must be accorded; and that it would required a clear case to justify a court in declaring that such an act, passed for such a purpose, had ceased to have force because the power of Congress no longer continued. In view of facts of public knowledge, some of which have been referred to, that the treaty of peace had not yet been concluded, that the railways are still under national control by virtue of the war powers, that other war activities have not been brought to a close, and that it cannot even be said that the man power of the nation has been restored to a peace footing, we are unable to conclude that the act has ceased to be valid.

Third. Was the act repealed by the adoption of the Eighteenth Amendment? By the express terms of the amendment the prohibition thereby imposed becomes effective after one year from its ratification. Ratification was proclaimed on January 29, 1919 (40 Stat., part 2, appendix p. 1942). The contention is that, as the amendment became on its adoption an integral part of the Constitution, its implications are as binding as its language; that in postponing the effective date of the prohibition the amendment impliedly guaranteed to manufacturers and dealers in intoxicating liquors a year of grace; and that not only was Congress prohibited thereby from enacting meanwhile new prohibitory legislation, but also that the then existing restriction imposed by the War-Time Prohibition Act was removed. See Narragansett Brewing Co. v. Baker & O'Shaunessy (U.S. D. Ct. R. I., November 12, 1919).

The Eighteenth Amendment, with its implications, if any, is binding, not only in times of peace, but in war. If there be found by implication a denial to Congress of the right to forbid before its effective date any prohibition of the liquor traffic, that denial must have been operative immediately upon the adoption of the amendment, although at that time demobilization of the army and the navy was far from complete. If the amendment effected such a denial of power, then it would have done so equally, had hostilities continued flagrant or been renewed. Furthermore, the amendment is binding alike upon the United States and the individual states. If it guarantees a year of immunity from interference by the federal government with the liquor traffic, even to the extent of abrogating restrictions existing at the time of its adoption, it is difficult to see why the guaranty does not extend also to immunity from interference by the individual states, with like results also as to then existing state legislation. The contention is clearly unsound.

Fourth. Did the prohibition imposed by the act expire by limitation before the commencement of these suits? The period therein prescribed is 'until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States.' It is contended both that the war has been concluded and that the demobilization has terminated.

In the absence of specific provisions to the contrary the period of war has been held to extend to the ratification of the treaty of peace or the proclamation of peace. Hijo v. United States, 194 U.S. 315, 323, 24 Sup. Ct. 727, 48 L. Ed. 994; The Protector, 12 Wall. 700, 702, 20 Ed. 463; United States v. Anderson, 9 Wall. 56, 70, 19 L. Ed. 615. From the fact that other statutes concerning war activities contain each a specific provision for determining when it shall cease to be operative, and from the alleged absence of such a provision here, it is argued that the term 'conclusion of the war' should not be given its ordinary legal meaning; that instead it should be construed as the time when actual hostilities ceased; or when the treaty of peace was signed at Versailles, on June 28, 1919, by the American and German representatives; or, more generally, when the actual war emergencies ceased by reason of our complete victory and the disarmament of the enemy, coupled with the demobilization of our army and the closing of war activities; or when the declared purpose of the act of 'conserving the man power of the nation, and to increase efficiency in the production of arms, munitions, ships, food, and clothing for the army and navy' shall have been fully satisfied. But there is nothing in the words used to justify such a construction. 'Conclusion of the war' clearly did not mean cessation of hostilities, because the act was approved 10 days after hostilities had ceased upon the signing of the armistice. Nor may we assume that Congress intended by the phrase to designate the date when the Treaty of Peace should be signed at Versailles or elsewhere by German and American representatives, since by the Constitution a treaty is only a proposal until approved by the Senate. Furthermore, to construe 'conclusion of the war' as meaning the actual termination of war activities, would leave wholly uncertain the date when the act would cease to be operative; whereas Congress evinced here, as in other war statutes, a clear purpose that the date of expiration should be definitely fixed. The reason why this was not directed to be done by a proclamation of peace is made clear by the use of the word 'thereafter.' It was expected that the 'conclusion of the war' would precede the termination of demobilization. Congress, therefore, provided that the time when the act ceased to be operative should be fixed by the President's ascertaining and proclaiming the date when demobilization had terminated.

It is insisted that he has done so. The contention does violence to both the language and the evident purpose of the provision. The 'date of which shall be determined and proclaimed by the President' is a phrase so definite as to leave no room for construction. This requirement cannot be satisfied by passing references in messages to Congress, nor by newspaper interviews with high officers of the army or with officials of the War Department. When the President mentioned in his veto message the 'demobilization of the army and navy,' the words were doubtless used in a popular sense, just as he had declared to Congress, on the occasion of the signing of the armistice: 'The war thus comes to an end.' If he had believed on October 28, 1919, that demobilization had, in an exact sense, terminated, he would doubtless have issued then a proclamation to that effect; for he had manifested a strong conviction that restriction upon the sale of liquor should end. Only by such proclamation could the purpose of Congress be attained, and the serious consequences attending uncertainty be obviated. But in fact demobilization had not terminated at the time of the veto of the act of October 28, 1919, or at the time these suits were begun, and, for aught that appears, it has not yet terminated. The report of the Secretary or War made to the President under date of November 11, 1919 (and transmitted to Congress on December 1), in describing the progress of demobilization, shows (p. 17) that during the preceding ten days (November 1-10) 2,018 officers and 10,266 enlisted men had been discharged; the rate of discharge being substantially the same as during the month of October, in which 8,690 officers and 33,000 enlisted men were discharged.

The War-Time Prohibition Act being thus valid and still in force, the decree in No. 589 is reversed, and the case is remanded to the District Court, with directions to dismiss the bill; and the decree in No. 602 is affirmed.

No. 589. Reversed.

No. 602. Affirmed.